The new FinTech company FinTest are finishing their financial statements for 2022 and will be reporting...

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The new FinTech company FinTest are finishing their financial statements for 2022 and will be reporting a profit for 2022 of $2 million. The company was started in 2019 but was not able to bring their product to the market until 2022 and this is consequently their first profit ever. The founder of FinTest has been fortunate enough to use a large inheritance for the financing of the start-up and as a result the founder is in complete ownership of the firm and the firm has no long-term debt. The founder is now interested in moving on to new ideas and is selling the company and cashing out. Similar listed firms have a beta value of 1.6 and the market return is 13%. The risk-free interest rate is 2%. The founder estimates that the profits will grow with 15% per year for the coming 4 years and then grow at a constant rate of 5% per year as other companies begin to enter the market. a) Estimate an appropriate required rate of return for an equity investor in FinTest. b) What is a fair price of FinTest using a discounted cash flow valuation? Use your required rate of return in a) as your discount rate. If you did not calculate a) use a discount rate of your choice. The new FinTech company FinTest are finishing their financial statements for 2022 and will be reporting a profit for 2022 of $2 million. The company was started in 2019 but was not able to bring their product to the market until 2022 and this is consequently their first profit ever. The founder of FinTest has been fortunate enough to use a large inheritance for the financing of the start-up and as a result the founder is in complete ownership of the firm and the firm has no long-term debt. The founder is now interested in moving on to new ideas and is selling the company and cashing out. Similar listed firms have a beta value of 1.6 and the market return is 13%. The risk-free interest rate is 2%. The founder estimates that the profits will grow with 15% per year for the coming 4 years and then grow at a constant rate of 5% per year as other companies begin to enter the market. a) Estimate an appropriate required rate of return for an equity investor in FinTest. b) What is a fair price of FinTest using a discounted cash flow valuation? Use your required rate of return in a) as your discount rate. If you did not calculate a) use a discount rate of your choice.